Oil rose past $85/bbl in London for the first time since 2018, the latest milestone in a global energy crunch that has been prices soar.
Brent futures briefly passed that level, before paring some gains. Brent for December settlement added one per cent to $84.80/bbl at 1:35 p.m. in London, after rising as much as 1.3 per cent. West Texas Intermediate for November rose 0.7 per cent to $81.87/bbl.
A shortage of gas and coal is triggering extra demand for oil products from the power market, and some banks expect the switch to boost prices further with winter approaching in the northern hemisphere. It’s starting to deplete stockpiles, with the U.S. crude storage hub of Cushing recording an unusually large drop for the time of year.
China also issued a long-awaited new batch of quotas for its private refiners to buy more crude, further pushing up demand.
Brent is set for its sixth straight week of gains. While demand is surging with economies rebounding from the pandemic, supply remains curtailed. Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman reiterated on Thursday the need for OPEC and its allies to take a gradual, phased approach to restoring output.
Prices will likely be “supported with demand rising by switching in the power sector and OPEC+ sticking to a prudent approach in bringing back supply,” said Giovanni Staunovo, commodity analyst at UBS Group AG. Commercial oil inventories are at their lowest since 2015 in OECD countries, and are likely to fall further, he said.
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